A new rise in interest rates is backed today by the majority of The Times Monetary Policy Committee, with two members pressing for an unprecedented half-point rise amid mounting concerns over inflation expectations.

The Times’s panel of experts split three ways, with two of the nine members arguing that rates should be kept on hold while inflation falls back, and the remaining five calling for a quarter-point rise.

Expectations are that the Bank of England’s Monetary Policy Committee (MPC) will raise rates today to 5.5 per cent, their highest level since April 2001.

Martin Weale, director of the National Institute of Economic and Social Research, and Anatole Kaletsky, The Times’s chief economics commentator, both called for a half-point rise.

They highlighted fears that inflation expectations risked being destabilised, after a month in which Mervyn King, the Bank’s Governor, has been forced to write his first explanatory letter to Gordon Brown for inflation exceeding its 2 per cent target by more than one percentage point.

Mr Kaletsky said: “When the CPI is more than 1 per cent away from its target, the MPC should act decisively to put it back on track.”

He said that the Bank’s MPC should “err on the side of tighter policy”, even though inflation was likely to fall this year.

Mr Weale argued that a half-point rise would not be that big a change, as rates would remain in a range of 5 per cent to 6 per cent, which he considered to be normal for the British economy.

Sir Steve Robson, former second permanent secretary to the Treasury, spoke for the majority of the panel when he voted for a quarter-point rise. “The economy is growing above trend with little or no capacity. Inflation as measured by the CPI is well over target . . . The housing market is powering ahead, as is the money supply. If anybody wants to know what ‘slam dunk’ means, this is it,” he said.

Rupert Pennant-Rea, a former deputy governor of the Bank of England, told the Bank that holding rates steady would cause it long-term damage. “The MPC’s greatest asset is its credibility, born from its ten-year record of keeping inflation close to target,” he said. “Losing even some of that credibility would be damaging, and take disproportionate time to repair.

“The fact that CPI inflation has moved above 3 per cent would, indeed, start the damage if the MPC left rates alone this month.”

Most of those who voted for a quarter-point increase this month expected that the Bank would need to raise rates again later this year.

Sir Alan Budd, a former member of the Bank’s MPC, said: “A further increase [which would probably be the last] may prove to be justified.”

Bronwyn Curtis, chairman of the Society of Business Economists, said that there were few signs that demand was softening, although there were tentative signs of moderation in parts of the housing market. “If demand doesn’t soften, another rate increase may be necessary in the autumn,” she said.

Only Sushil Wadhwani, who switched his vote to an increase solely because of fears that expectations would otherwise be damaged, made clear that he did not expect another rise to prove necessary.

Geoffrey Dicks, of RBS Financial Markets, put the case for keeping rates on hold, arguing that expectations would follow the fall in inflation expected in the coming months. In addition, consumer demand was likely to slow, he said. “In six months’ time the economy will look and feel very different from today.”

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